China’s steel futures slightly pulled back from a steep fall during morning trade on Monday, dragging down steelmaking raw materials, on technical selling and as investors took recent industry association and government statements as a cue to book profits.
Iron ore and coking coal had their biggest one-day falls in about three months amid concerns about slowing demand from the steel industry as Beijing ramps up its environmental inspections.
Some investors viewed the steel market’s failure to breach the 4,000 yuan per tonne mark on Friday, following several near-misses, as a bearish technical signal, analysts said.
The most-active rebar futures on the Shanghai Futures Exchange edged up 0.2 percent to 3,932 yuan ($592.15) a tonne, after touching an intraday high of 3,960 yuan a tonne earlier in the session.
A broad statement about supply-side reform issued by the National Development and Reform Commission (NDRC) on Friday was viewed as another effort by the government to curb speculative buying, which the authorities believe has fuelled the recent rally.
In the statement, it said it will reinforce capacity cutbacks in steel sector while keeping supply and demand in balance, downplaying worries about tightening supplies of product as Beijing ramps up its environmental inspections across heavy industry and closes low-grade mills.
It followed a similar report from China’s industrial association last week.
The statements “show the clear intention to keep prices stable. Any further price rallies will probably be curbed by government policy,” Orient Futures said in a research note.
Data showing a slower pace of buying also suggested that the market was more bearish. Weekly purchases of construction steel product in Shanghai, which typically reflects downstream market demand, fell 5.7 percent to 29,530 tonnes last week from a week earlier, according to Orient Futures.
“Property and infrastructure projects have been slowing down due to heavy rain and a typhoon in southern China,” said Xu Bo, analyst at Haitong Futures.
Typhoon Hato, a force 10 typhoon, pummelled southern China last week and killed nine people in Macau. Another storm “Pakhar” has landed in coastal provinces during the weekend.
The most-traded iron ore futures on the Dalian Commodities Exchange lost 2.8 percent to 572.5 yuan a tonne on Monday, posting its biggest one-day loss since June 1.
“The latest round of the restocking process at steel mills is almost done, which will weaken demand in the coming days,” Xu said.
The January coking coal contract fell 2.3 percent to 1,471 yuan a tonne on Monday. Coke futures closed nearly 1 percent higher at 2,476 yuan a tonne.
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